Incidents:
The company released its 2023 annual report. In 2023, it achieved operating income of 4.200 billion yuan, +26.91% year-on-year; realized net profit to mother of 982 million yuan, +47.90% year-on-year. Among them, 23Q4 achieved operating income of 1,328 billion yuan, +43.88% year-on-year, and +33.60% month-on-month; realized net profit of 314 million yuan, +61.03% year-on-year, and +35.34% month-on-month.
Revenue from overseas electricity distribution has increased rapidly, and future growth can be expected
In 2023, the company achieved overseas revenue of 2,791 billion yuan, +51.29% year over year, and gross margin +6.42pct year on year. Among them, the overseas intelligent electricity/intelligent power distribution/new energy business achieved revenue of 25.61/1.17/ 113 million yuan respectively, or +41.72%/+406.67%/+672.38% year-on-year. In terms of electricity business, the company's software products have been used in more than 130 projects in overseas markets, and factory layout plans in Europe and Latin America have been initiated; in terms of power distribution business, the company has won bids and delivered distribution network collection projects in the African market. In 2023, the company's revenue in Africa, Asia (excluding mainland China) and Europe was +156.66%/+32.25%/+428.20%, respectively. Revenue in Africa and Asia (excluding mainland China) grew rapidly, and the company is expected to fully benefit from overseas market growth in the future.
Domestic business is under pressure in the short term, and electricity meter tenders are expected to resume
According to our statistics, in the 2023 State Grid smart meter tender, the company won 236.23/2.08/0.28 billion yuan respectively, or -31.33%/-17.21%/-45.07% compared with the same period last year. Class A single-phase meters contributed a large increase in the first batch of electricity meters of the State Grid in 2024. The number of tenders for A-grade/B-grade/C-grade meters was +107%/+9%/+5% over the same period last year. After the number of smart meter tenders reached its peak in 2014-2015, the first round of smart meter transformation was basically completed. The smart meter certification cycle generally did not exceed 8 years. We believe that next, the country will enter a new cycle of electricity meter changes, and the number of electric meter tenders is expected to enter a period of accelerated growth.
Profit Forecasts, Valuations, and Ratings
We expect the company's 2024-2026 revenue to be $52.19/64.91/8.080 billion yuan, respectively, with year-on-year growth rates of 24.26%/24.37%/24.48%, net profit to mother of 11.66/14.41/17.75 billion, year-on-year growth rates of 18.65%/23.63%/23.14%, EPS 2.39/2.95/3.63 yuan/share, respectively, and a 3-year CAGR of 21.78%. Since the company is a leading exporter of electric meters, benefiting from high growth in the overseas meter market, based on comparable company valuations, we gave the company 23 times PE in 2024, with a target price of 51 yuan, maintaining a “buy” rating.
Risk warning: Overseas meter demand falls short of expectations; overseas policy risks; fluctuating raw material prices.